Academic journal article Defense Counsel Journal

Health Care

Academic journal article Defense Counsel Journal

Health Care

Article excerpt

HMO Decisions Not Fiduciary Acts

Treatment decisions made by physicianemployees of health maintenance organizations are not fiduciary acts within the meaning the Employee Retirement Income Security Act, the U.S. Supreme Court held in Pegram v. Herdrich, 120 S.Ct. 2143 (2000).

A plaintiff sued an HMO doctor for negligently delaying an ultrasound diagnostic procedure, as a result of which the plaintiff suffered a ruptured appendix and peritonitis. She recovered $35,000 in her malpractice action. In federal court, to which the case had been removed, she added a count alleging that the HMO was a fiduciary within the meaning of ERISA, 29 U.S.C.

1109(a), and that the HMO's capitation system of payment violated its fiduciary duties by rewarding physicians for withholding treatment. The Seventh Circuit bought this theory, at least in this case, which claimed that the delay in treatment was for the "sole purpose of increasing" the HMO's doctors' bonuses. 154 F.3d 362, 373 (7th Cir. 1998).

But the Supreme Court disposed of the case by ruling that Congress did not intend to bring HMOs, by virtue of their physicians' treatment decisions, within the ambit of a "person who is a fiduciary," as provided in Section 1109(a). …

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